Migration is a very old phenomenon; much older than trade and capital flows. Scientists believe that the first massive migration of modern humans happened between 60,000 and 80,000 years ago from Africa to Asia. In modern history, migration has typically been the subject of heated policy and political debates, even becoming the raison d’etre for hundreds of organizations worldwide.

The number of international migrants increased from 75 million in 1960 to close to 250 million today. This has created important diasporas for many countries in the world, both large and small. This trend has been accentuated by the recent refugee crisis, adding about 15 million people to overall migrant figures.

Clearly, this irreversible trend begs the question: Can the growing diasporas represent an opportunity for developing countries in nurturing their home economies? Migrants and diasporas are, to some extent, “unexploited capital,” and the purpose of this document is to explore this growing opportunity.

In this paper, we start by describing the most recent data on migration and diasporas. Then we review different ways through which diasporas can be an asset for the economic development of their home countries. Finally, we suggest guidelines on policies that can be used to utilize these assets.

WHERE AND HOW LARGE ARE DIASPORAS?

Many countries have very large and significant diasporas, which tend to be quite spread out around different areas of the world. We focus on seven groups of countries containing developing nations. These groups are emerging Europe (which we define as all Eastern European countries plus Turkey), emerging Asia, Middle East and North Africa, sub-Saharan Africa, South America, and Central America and the Caribbean (including Mexico).

The sizes of diasporas by region of origin, in millions of people are about 45 million migrants around the world from emerging Europe, 70 million for emerging Asia, 25 million for the Middle East and North Africa, close to 25 million from sub-Saharan Africa, 12 million for South America, and 25 million for Central America and the Caribbean. Migrants from developing countries account for about 200 million of migrants out of a total of 250 million migrants in the world.

These migrants are, in fact, also quite geographically spread around the globe, as shown in Figure 2, which visualizes the distribution of destination regions for these seven groups. Migrants whose countries of origin are in emerging Europe are spread around other countries in emerging Europe (58.5 percent) and in Western Europe (32.6 percent), as well as a few of them in North America and the Middle East and North Africa. Besides from migrants originally from Central America and the Caribbean countries—who are overwhelmingly residing in North America—migrants originating from countries in all the other regions are characterized by having a large share of their migrants in other countries within the same region, but also another sizable share spread around other developed and developing countries.

HOW CAN DIASPORAS FOSTER ECONOMIC DEVELOPMENT OF THEIR COUNTRIES OF ORIGIN?

We focus on three main ways through which diasporas can support the development of their home countries: remittances, business networks, and the diffusion of knowledge.

Remittances

The role of remittances can be highly beneficial for countries that have a relative large diaspora. Remittances can significantly increase income, consumption and investment, thus increasing welfare among, particularly, lower income households, and in turn complement through taxation resources that can be used toward the provision of public goods such as education, health, and infrastructure, among others.

Overall, remittances have become an increasingly important flow: from year 2000 until 2015 they more than doubled as a share of global production. Today they add up to almost $440 billion per year worldwide (more than three times the size of official development aid flows). For particular countries, such as Mexico, remittances are a crucial source of income. Only in 2016, remittances to Mexico reached almost $29 million—about 2.7 percent of its GDP—mostly coming from Mexicans living and working in the United States. Countries like India and the Philippines, together with Mexico, are the largest recipients of remittances. For smaller countries, such as Armenia, Moldova and El Salvador, remittances make at least one sixth of national income.

. . . The size of remittances received by different regions containing a majority of developing countries are tracked graphically. These amount to significant sizes and trend upward over time. Countries in emerging Europe, for instance, received $50 billion of remittances in 2016; a similar figure for countries in the Middle East and North Africa as well as Central America and the Caribbean. Countries in emerging Asia received about $250 billion of remittances in 2016, while countries in sub-Saharan Africa and South America received about $35 billion and $16 billion, respectively. Thus, remittances are a key component of how countries benefit from their diaspora, and often a very important source of foreign currency for developing countries.

Business networks

Migrants residing abroad can play a crucial role in lowering the costs of doing business in between their home and current countries.

The diffusion of knowledge

One fact that has fascinated economists for the past decades is that the diffusion of knowledge is a localized phenomenon. An example is that scientists and inventors tend to cite more often the work of other scientists and inventors (e.g., academic papers, patents, etc.) located nearby. Another example is that local firms tend to become more productive following the establishment in their neighbourhood of a new larger firm, often a multinational one, from which they can learn or copy best practices.